P&I premiums will need to increase by 15% to 20% at the February 2004 renewal according to the joint head of one of the leading P&I clubs.

Rodney Eccleston, joint managing director of the North of England P&I Club, told a reception of the club's Greek members yesterday that the increase was likely to be even higher than expected due to a recent surge in dry cargo claims.

Eccleston said that there has been a noticeable increase in the frequency of large P&I claims--those over US$ 500,000--in recent months, following a huge surge in freight income, particularly in the dry cargo sector.

"This is a common trend, with a high incidence of claims often following closely on a period of high freight volumes," he said. "However, it inevitably puts more pressure on P&I insurance costs."

He said that many shipowners were already facing above-inflation premium rises to prevent further erosion of P&I club free reserves.

"The leading International Group clubs made an overall underwriting loss of US$338 million in the 2002/2003 policy year, equivalent to 24% of premium income," he said. "Even after allocation of investment income, the deficit for the top nine clubs was US$254 million--a quarter of a billion dollars."

The manager of the club's Greek office,Tony Allen said the North of England had fared better than most in recent years due to the willingness of its worldwide membership to pay realistic premiums.

"As such we increased our free reserve at the last renewal from US$89 million to US$100 million, in line with tonnage growth. But though we are making every effort to help our members manage risks and control claims costs, the current surge in cargo claims will inevitably have an adverse affect on next year's premiums," he cautioned.